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Recently Adopted PERS Administrative Rules

GAAP Cost Allocation
The Governmental Accounting Standards Board (GASB) has adopted new standards for public pension plan financial reporting (GASB 67 and GASB 68). GASB 68 expands the pension liability information to be included by government bodies in their annual financial statements. The most efficient way for PERS-participating employers to obtain the needed data is for PERS to provide it, but the costs of doing so needed specific statutory authorization. House Bill 4155 (2014 Regular Session) provided that authorization and directs the PERS Board to establish by rule procedures for recovering the additional actuarial and auditing costs associated with helping employers to comply with generally accepted accounting principles from investment earnings on employer contributions. This rule will clarify the process by which the GASB associated costs will be allocated to employers.
This rule will have no fiscal impact to PERS administration, the PERS Fund, or PERS members. There will be a fiscal impact to PERS employers, via a reduction in annual earnings crediting, in the amount necessary to cover the agency’s actual costs of providing the financial information PERS employers need to comply with new GASB standards and generally accepted accounting principles.

Board Adoption: 07/25/2014
Effective:         07/25/2014
Text:               459-007-0009
PERS Board Adoption Memo

 

OSGP
OAR 459-050-0025, Deferred Compensation Advisory Committee, establishes criteria to select advisory committee members for OSGP and describes the duties and tenure of those committee members. Currently, the rule requires that four of PERS’ executives or managers, designated by the PERS Executive Director, shall review applications of potential advisory committee members. It is sometimes difficult to find four managers who have: 1) not been on a previous panel, and 2) have the time to serve on the committee. Therefore, to make the process more efficient, the rule would be amended to require just two managers instead of four to review the applications along with the Deferred Compensation Program Manager.
On January 12, 2007, OAR 459-050-0037, Trading Restrictions, was approved by the PERS Board to implement trading restrictions in the OSGP. This rule provides authority to prevent frequent trading which can have a negative effect on other participants in the plan, and also provides an equity wash for the Stable Value option, a requirement of the Stable Value provider. At its November 21, 2008 meeting, the Board approved revisions to the rule that removed the 90-day holding restriction on the funds, with the exception of the International Stock Option, where the 90 day restriction was decreased to 30 days. The $100,000 trade limit and the restrictions on the Stable Value Option were not changed. Another revision was adopted on July 29, 2011, to add the Self-Directed Brokerage Account to the restrictions on the Stable Value Fund.
OSGP was recently advised by Galliard Capital Management, the stable value manager, that restrictions were no longer required on trades from the Stable Value Fund directly to the Intermediate Bond Fund. Therefore, these rule modifications would remove that restriction. The restrictions on trades directly to the Short Term Fixed Option and Self-Directed Brokerage Account would remain in place.
When OAR 459-050-0075, Distributions During Employment, was revised to add the trustee-to-trustee transfers for the purpose of purchasing service time, funds from the Roth 457 were not included as that investment option had just been added and management wasn’t sure if after-tax funds would be appropriate for these transfers. After some further research, including talking to other governmental plans, we recommend adding the Roth funds as potential sources for these service purchases.
OAR 459-050-0077, Loan Program, was adopted in 2007 to establish eligibility and processes for participants in OSGP to obtain a loan. As the loan is repaid, the loan payments are deposited back into the participant’s account. When the rule was adopted, the Short Term Fixed Account was chosen as a default investment fund for these loan payments when the participant had not otherwise made an allocation. At that time, the Short Term Fixed was earning 4.94 percent for the year. However, over the years, that fund has been running in the negative (-0.15 percent in 2013). To prevent any losses to the payments being re-invested, a better choice would be the Stable Value Option, which has had positive earnings over the years (1.34 percent in 2013). The rule modification changes that default allocation.
Board Adoption: 07/25/2014
Effective:         07/25/2014
Text:               459-050-0025
                      459-050-0037
                      459-050-0075
                      459-050-0077   
PERS Board Adoption Memo

 

Selection of Preliminary Disability Benefit Option
PERS Tier One/Tier Two Program members who apply for a disability retirement are asked to complete a preliminary benefit option selection form. That form documents the member’s retirement option selection in the event that the member dies before their application is approved. If the member had not made that selection, they would be considered to have died before retirement, therefore providing their beneficiary only with a death benefit under ORS 238.390 or 238.395 instead of them being considered the survivor beneficiary of a disability retirement.
The Option 1 benefit pays a monthly retirement allowance only for the member’s lifetime; upon death, no benefit is paid to any beneficiary. The proposed rule modification is to remove Option 1 as a preliminary option selection as, if it was selected, it provides no protection for a beneficiary should the member die before their disability retirement is approved.  Upon approval of a disability claim, a disabled member may select Option 1 as their final benefit option using a disability benefit application form with the benefit option approved by spousal consent.
Board Adoption: 07/25/2014
Effective:         07/25/2014
Text:               459-015-0055
PERS Board Adoption Memo

 

Disability Housekeeping
A review of our Oregon Administrative Rules pertaining to the administration of the Tier One/Tier Two disability program (Division 15) and the disability benefit paid under the OPSRP Pension Program (Division 76) revealed the need for some cleanup. For example, OAR 459-076-0010 of the OPSRP disability rules, adopted in 2005, contains an error in (4)(b) to incorrectly require either an “orthopedic specialist or neurosurgeon;” the proposed edits delete the erroneous phrase “or neurosurgeon.” Also, OAR 459-015-0010(6) and sections (2) and (6) of OAR 459-076-0010 that deal with denying an application clarify the reasons that could be used for a denial. Other minor edits were made to the rules to improve readability and update citations.
Board Adoption: 07/25/2014
Effective:           07/25/2014
Text:                459-015-0010
                        459-076-0010                       
PERS Board Adoption Memo
 
 
Federal Tax Reconnect
House Bill 4003 (2014 Regular Session) updated the connection date to the Internal Revenue Code and other provisions of federal tax law. In the bill, all the references to title 26 of the U.S. code have been updated to “as in effect on December 31, 2013.” OAR 459-080-0250 regarding IAP account installments currently states “any distribution will be adjusted to comply with the required minimum distribution requirements of 26 U.S.C. 401(a)(9) and regulations implementing that section, as in effect August 29, 2003.” The proposed rule modification updates the effective date to December 31, 2013.
Board Adoption: 07/25/2014
Effective:           07/25/2014
Text:                459-080-0250                       
PERS Board Adoption Memo

 

Attorney General’s Model Rules of Procedure
The Oregon Administrative Procedures Act (APA) requires state agencies to adopt procedural rules for administrative rulemaking and conducting contested case proceedings. The APA also requires the Attorney General to adopt model rules that state agencies must use, although agencies may adopt additional rules governing administrative procedures. OAR 459-001-0005 adopted the Attorney General’s Model Rules of Procedure. In response to statutory changes and appellate court decisions, the Attorney General updated the Model Rules, effective January 31, 2012. These rule modifications are only to conform to the date of and therefore adopt the updated Model Rules.

Board Adoption: 03/31/2014
Effective: 03/31/2014
Text: 459-001-0005
  PERS Board Adoption Memo
 
 
 
Receipt Date
To streamline operations and create greater efficiencies, PERS has been moving away from maintaining records in physical hard copy form, and has been directly imaging all documents received, rather than affixing a receipt stamp to the item and then imaging it. (Items received at the front desk are still receipt stamped.) As a consequence, receipt stamping and imaging are often one and the same.
The prior five business day window created delays and extra work for staff by extending the time period in which they must wait before they can complete work on member accounts, or requiring recalculations due to late purchases or other transactions. A three business day window reduces the number of recalculations that PERS will have to perform due to purchase submissions that come in after the purchase deadline but before the imaging window has ended and will allow PERS to process retirement applications in a more timely manner. PERS considers three business days sufficient to avoid the risk of any delay attributable to the document being routed to imaging.
Because of the third party handling and processing, there is still a need to maintain a window to account for any potential delays in processing by the third party. Delays are rare and would not extend beyond a few business days. Therefore, three business days would be more than sufficient to address this narrow concern.
Some members, however, have been disregarding the statutory deadlines and have been instead relying on the five business days window and treating it as a grace period to complete certain transactions. For example, rather than delivering an item in person at the front desk, where it will be receipt stamped, some members are sending the item in after the statutory deadline, based upon the understanding that it will be imaged, triggering the five business days window. This essentially allows the member an extra week beyond the statutory deadline.
For these reasons, staff proposed narrowing the window from five business days to three business days to provide greater administrative efficiency, consistency, and certainty, and allows PERS to administer its processes in line with the timelines prescribed in statute. This modification also decreases the risk of using the rule to circumvent statutory deadlines. The proposed rule modifications also clarify that items recorded on PERS’ daily cash receipts log and/or check log satisfy the receipt stamp affixation/display requirement for received items.
Board Adoption: 03/31/2014
Effective: 03/31/2014
Text: 459-005-0220
  PERS Board Adoption Memo
 
 
 
COLA and Supplementary Payments
The 2013 Oregon Legislative Assembly (Special Session) passed Senate Bill 861, which modified the COLA structure previously adopted in Senate Bill 822 (2013) for COLAs paid on or after July 1, 2014. Under Senate Bill 861, the COLA is determined using the monthly allowance, pension, or benefit a recipient is entitled to on July 1 of the year in which the increase is calculated. The proposed OAR 459-005-0510 clarifies that the resulting annual COLA is paid during the following 12 months in the recipient’s monthly allowance, pension, or benefit starting on August 1.
The bill includes an annual supplementary payment that begins in 2014 and sunsets on December 31, 2019. The annual supplementary payment is based on 0.25 percent of the benefit recipient’s yearly allowance, pension, or benefit, but capped at $150. An additional supplementary payment of 0.25 percent is paid to a benefit recipient whose yearly allowance, pension, or benefit is $20,000 or less.  
Annual supplementary payments will be paid to retired members, beneficiaries, alternate payees, and judges who receive or are entitled to receive a retirement allowance, pension, or benefit on July 1. Alternate payees will receive a supplementary payment by operation of ORS 238.465(5), which requires that any increase in a member’s retirement allowance increases the amount paid to the alternate payee in the same proportion. Similar to the provisions applicable to the COLA, however, if the associated member is not receiving a supplementary payment because he or she has not yet retired, then the alternate payee will not receive a supplementary payment.
Board Adoption: 03/31/2014
Effective: 03/31/2014
Text: 459-005-0510
459-005-0520
  PERS Board Adoption Memo
 
 
 
RHIPA
ORS 238.415 established the Retiree Health Insurance Premium Account (RHIPA) to pay a monthly subsidy toward the cost of healthcare coverage for eligible retired state employees who are not Medicare eligible. This subsidy is actuarially funded solely by state employers as part of their employer rates and applies only to members who retire from a state employer and who immediately apply for their retirement benefit.
To be eligible for the subsidy, the state employee (or their surviving spouse or dependent) must retire for service or disability and have 8 years or more of “qualifying service.” The monthly premium subsidy is calculated on a sliding scale that incrementally increases with years of “qualifying service” with a state employer. For Plan Year 2014, the RHIPA monthly premium subsidy will range from $163.39 (8 years of service) to $326.79 (30+ years of service).
Board Adoption: 03/31/2014
Effective: 03/31/2014
Text: 459-005-0001
459-005-0050
  PERS Board Adoption Memo